This paper explores the growing role of green finance in supporting the global transition towards sustainability and a low-carbon economy. It provides a comprehensive analysis of the key instruments, institutional mechanisms, and regulatory frameworks that shape green financial flows at both the global and European levels. This paper identifies several structural and implementation challenges, including fragmented taxonomies, risks of greenwashing, insufficient market depth, and limited coordination between public and private stakeholders. Particular attention is given to the operationalization of green finance through data standardization, risk-sharing mechanisms, and enhanced transparency supported by technological innovation. The paper also examines European initiatives such as the EU Green Deal, the Sustainable Finance Disclosure Regulation (SFDR), and the role of national development banks, with specific reference to the Croatian context. The findings suggest that the success of green finance depends not only on its conceptual soundness but primarily on effective governance, credible reporting standards, and coherent policy implementation. This paper concludes with policy recommendations aimed at strengthening institutional capacity, improving the regulatory environment, and promoting innovative financing mechanisms for sustainable development.